forfeiture for breach of contract

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Minnesota Law Review

1921

Forfeiture for Breach of ContractHenry W. Ballantine

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MINNESOTA

LAW REVIEWVOL. V APRIL, 1921 No. 5

FORFEITURE FOR BREACH OF CONTRACT

By HENRY W. BALLANTINE*

I. IMPLIED CONDITIONS; EFFECT OF BREACH AFTER PART

PERFORMANCE.

A S Professor Williston points out,' few questions in the laware more difficult to solve than that concerning the

right of one who has broken his contract to recover for such bene-

fits as he may have conferred by part performance. No solutioncan be entirely satisfactory because two guiding principles of

legal-policy pull in different ways. On the one hand to allow a

party to stop performance when he pleases and sell his part

performance at a value fixed by the jury countenances unfaith-fulness and may be regarded in effect as imposing a new con-

tract on the defendant. On the other hand to deny the party in

default any recovery will often give the defendant far more than

fair compensation for the non-completion of the contract and im-

pose on the plaintiff an unjust forfeiture.It is the general American rule that a material breach of con-

tract by the plaintiff will excuse the defendant from the duty ofgoing forward with the executory portions of a contract. Should

it also excuse the defendant from the duty of paying for the bene-

fits received by part performance? If strict or complete perform-

ance is an express condition precedent to a party's right to the

counter performance, he will generally be left entirely .without

remedy, contractual or quasi contractual. The same result is often

supposed to follow from breach of an implied condition, though

* Professor of Law, University of Minnesota.1 3 Williston, Contracts, Sec. 1473.

MINNESOTA LAW- REVIEW

the other party may receive value from what he has done fargreater than the damages caused by the breach. It is the purposeof this paper to discuss the question of the loss of the benefits ofpirt performance, first as resulting from breach of implied condi-tions, and second, as resulting from express conditions.

In many jurisdictions the rigid rule has been announced,founded on the policy of securing the faithful performance ofcontracts, that no recovery whatever will be allowed to a party inserious default under an entire contract. 2 The mere fact thatpartial performance is beneficial to the other party is not ordi-narily enough to raise an obligation to pay for it.3 To allow re-covery for partial performance, the circumstances must be suchthat a new contract may be implied. The right to recover de-pends on defendant's election to accept with knowledge of the de-fault.' Where there is no evidence of acceptance of partial per-formance such as to show a waiver of conditions or a new prom-ise, the plaintiff who has failed in full and substantial perform-ance of an entire contract cannot recover anything either on thecontract itself or in quantum meruit. 4

In the case of building contracts where the contractor has ex-pended labor and material upon the land of another which cannotbe returned to him, but which must necessarily be retained by theowner of the land, the rule is generally adopted that the ownermust pay for substantial performance, and in some jurisdictionsfor partial performance, after full allowance for defects.' Thedoctrine of substantial performance has been stated to applywhere a builder has in good faith substantially performed, butthere are minor defects which may be so remedied that the ownerwill have in substance that for which he contracted. The buildermay recover on the contract the agreed price less such deduction

2 Smith v. Brady, (1858) 17 N. Y. 173, 72 Am. Dec. 442; 2 Williston,Sec. 841, 1475.

3 Elliott v. Caldwell, (1890) 43 Minn. 357, 45 N. W. 845; Johnson v.Fehsefeldt, (1908) 106 Minn. 202, 118 N. W. 797; Hoglund v. Sortedahl,(1907) 101 Minn. 359, 112 N. W. 408; Anderson v. Pringle, (1900) 79Minn. 433, 82 N. W. 682; Uldrickson v. Samdahl, (1904) 92 Minn. 297,100 N. W. 5.

4 Sumpter v. Hedges, L. R., [1898] 1 Q. B. 673, (Builder abandoneda lump sum contract); Taulbee v. McCarty, (1911) 144 Ky. 199, 137 S. W.1045, 36 L. R. A. (N.S.) 143, Ann. Cas. 1913 A 456. See also Bentley v.Edwards, (1914) 125 Minn. 179; 146 N. W. 347, 51 L. R. A. (N.S.) 254;Ptacek v. Pisa, (1907) 231 Ill. 522, 83 N. E. 221; 6 R. C. L. 972, 973;Morrison, Rescission of Contracts, 107. Decennial Dig. secs. 297, 319, 320.

5 Leeds v. Little, (1890) 42 Minn. 414, 418, 44 N. W. 309.


as will suffice to cure the defects.6 In building and constructioncontracts very often slight omissions or defects may occur, not-withstanding the most honest, diligent, and competent effort to

perform in every respect in accordance with the contract. Literalcompliance in every detail cannot be required in practical affairs.

Substantial performance is sufficient if it accomplishes all the pur-poses of the thing contracted for, so that an allowance out of thecontract price will give full indemnity to the owner. This relief

is given in view of the fact that the owner cannot restore the con-

tractor to his former position, and the contractor would other-

wise suffer great loss to the enrichment of the owner. Accordingto the better view, the remedy is allowed on the express contract.According to other courts, the remedy is on quantum meruit evenif performance is substantial.7

The doctrine of substantial performance, however, does not

apply where omissions or departures from the contract are inten-

tional, or so serious as not to be capable of remedy or of compen-

sation by allowance from the contract price. The mere fact that

partial performance is beneficial to a party is not enough to raise

an obligation to pay for it, at least where he has no option to reject

or return it." The policy of securing full performance of con-

tracts and of discouraging parties from abandoning their en-

gagements or performing them as their interest or caprice may

dictate, is felt to forbid a mbre liberal measure of relief. The

severity of the rule as to entire contracts is relaxed only in cases

of oversight, inadvertence, or excusable mistake, easily suscep-

tible of remedy.It is said that the purpose of the doctrine of substantial per-

formance is to secure substantial justice between man and man

by relaxing, in proper cases, the rigid and in practice, sometimes

harsh rule of the common law as to the entirety of contractsf.

But the courts cannot extend it to enable parties to contracts to

abandon them and recover on a quantum meruit whenever they

may find it for their interest to do so.It is sometimes assumed that the "original rule (of the com-

mon law) requires proof of exact and literal performance of all

6 Snider v. Peters Home Bldg. Co., (1918) 139 Minn. 413, 167 N. W.108.

7 Foeller v. Heintz, (1908) 137 Wis. 169, 118 N. W. 543, 24 L. R. A.(N.S.) 327 n.

8 Uldrickson v. Samdahl, (1904) 92 Minn. 297, 100 N. W. 5; Elliottv. Caldwell, (1890) 43 Minn. 357, 45 N: W. 845.

9 Anderson v. Pringle, (1900) 79 Minn. 433, 435, 82 N. W. 682.

MINNESOTA LAW REVIEW

the terms and conditions of a contract as a condition precedentto the right of recovery by the contractor."10 It is supposed thatthis "original rule" has been "relaxed" out of the "charity of thelaw" by the doctrine of substantial performance. But this is anerror. The doctrine of substantial performance dates back at leastto Lord Mansfield's judgment in Boone v. Eyre in 1777, and ob-tained in England for many years, although later the Englishcourts held strict performance necessary and treated implied con-ditions in bilateral contracts like express conditions. They havenow gone back to the doctrine of substantial performance. AsProfessor A. L. Corbin has pointed out :11

"If the defendant has not stipulated that performance by plaintiffshall be a condition precedent to his own active duty, but hasmerely caused the plaintiff to make a promise and thus undertakea duty on his own part, then the court need not require any per-formance at all by the plaintiff as a condition precedent to thedefendant's duty, and if it requires any performance at all as acondition it is fair and just to require only substantial perform-ance as such condition."

As Mitchell, J. said :1

"Substantial, and not exact performance, accompanied by entiregood faith, is all that the law requires in the case of any contractto enable a party to recover on it."This is particularly the case with reference to right to recoverwhere the defective performance has been accepted, as contrastedwith the right to continue with a contract and demand an accep-tance of defective performance." A buyer, for example, need notaccept a larger or smaller quantity than that bargained for, norneed he accept goods of a different kind or of an inferior qual-ity.' 4 But one cannot "while he retains the benefits of a substantialperformance, totally defeat an action for the price he has agreedto pay, or for specific performance of the contract on his part,on the ground that the plaintiff has not completed the perform-ance required of him by the contract. He cannot at the sametime affirm the contract by retaining its benefits and rescind

10Hoglund v. Sortedahl, (1907) 101 Minn. 359, 112 N. W. 408; 6 R.C. L. 966; 5 Page, Contracts, Sec. 2778.

"x Conditions in the Law of Contracts, 28 Yale L. Jour. 739, 759. SeeMorrison, Rescission of Contracts, 115.

12 Peterson v. Mayer, (1891) 46 Minn. 468, 49 N. W. 245, 13 L. R. A.72; Brown v. Hall, (1913) 121 Minn. 61, 65, 140 N. W. 128.

13 Compare Boone v. Eyre, (1777) 1 Henry B. 273 n. with Ellen v.Topp, (1851) 6 Exch. 424, Graves v. Legg, (1854) 9 Exch. 709, andGlazebrook v. Woodrow, (1799) 8 Term. Re p. 366.

'4 5 Minn. Law Rev. 216; 2 Williston, Contracts, Secs. 844, 1009.


it by repudiating its burdens."'" This rule applies to contractsof all kinds, to contracts for building and construction, for thesale of real estate, and for the manufacture and sale of goods.

Many cases of part performance, however, cannot be broughtwithin the doctrine of substantial performance even if it is liber-ally applied.16 An unjust forfeiture will often result from deny-ing all recovery to a plaintiff even if he is materially in default.The weight of authority now allows a builder whose breachof contract is not willful, to recover the value of his work lessthe damages caused by his default.'7 The recovery is allowed

not on the contract but in quasi contract, on the ground that itis not fair that the defendant should profit at the plaintiff'sexpense.

A few jurisdictions, including Minnesota, however, denypartial recovery where the builder has not substantially per-formed.18 A failure of performance in any material or substan-tial respect will defeat any recovery on quantum meruit for thevalue of what has been done in partial performance. 1

In case of willful abandonment or culpable departure fromduty by the plaintiff, the fear of putting a premium upon delib-erate breach of contract or giving it any indulgence, has ledmany courts to hold that sound public policy requires a forfeit-ure, a denial of all right of recovery in any form whatever.20 Arule which would enable a party to abandon his contract andlose nothing thereby would have a tendency to encourage badfaith and lessen the binding force of contracts." But can it be

15 German Say. Inst. v. De La Vergne R. M. Co., (1895) 70 Fed. 146;Rosenthal P. Co. v. National, etc., Co., (1919) 226 N. Y. 313, 123 N. E.761; Kauffman v Raeder, (1901) 108 Fed. 171, 54 L. R. A. 247, 242;5 Page, Contracts, Secs. 2785, 2786, 2788.

163 Williston, Contracts, Sec. 1475; Bentley v. Edwards, (1914) 125Minn. 179, 146 N. W. 347, 51 L. R. A. (N.S.) 254.

17 Dermott v. Jones, (1859) 23 How. (U.S.) 220, 16 L. Ed. 442; Pinchesv. Swedish Church, (1887) 55 Conn. 183, 10 Atl. 264; Woodford v.Kelly, (1904) 18 S. Dak. 615, 101 N. W. 1069; Hayward v. Leonard,(1828) 7 Pick. (Mass.) 181, 19 Am. Dec. 68; Dakin v. Lee, [1916] 1K. B. 566.

18 Uldrickson v. Samdahl, (1904) 92 Minn. 297, 100 N. W. 5; see also,Johnson v. Fehsefeldt, (1908) 106 Minn. 202, 118 N. W. 797.

19 Elliott v. Caldwell, (1890) 43 Minn. 357, 45 N. W. 845; Waite v.Shoemaker & Co., (1915) 50 Mont. 264, 146 Pac. 736; Riddell v. Peck-Williamson Co., (1902) 27 Mont. 44, 66 Pac. 241; Steel Storage Co. v.Stock, (1919) 225 N. Y. 173, 121 N. E. 786; C. B. Morrison, Rescissionof Contracts, 121.

20 Woodward, Quasi Contracts, Sec. 166.21 6 R. C. L. 974; Elliott v. Caldwell, (1890) 43 Minn. 357, 45 N. W.


laid down without qualification that any willful breach on plain-tiff's part should prevent any recovery by him even for sub-stantial performance? Such a rule seems altogether too severe.The law should consider the degree of moral delinquency, theextent of non-performance, and the ratio of damages to bene-fits received.2 2 It should establish a rule "which weighs theeffect of the default, and adjusts the rigor of the remedy to thegravity of the wrong. '2

Some courts hold that even a party who willfully breaks acontract of employment may recover for-the value of work donein excess of the damages caused by the breach. The leading au-thority on this point is the much mooted case of Britton v. Tur-ner.21 It was there held that one who voluntarily abandons acontract of employment after large part performance, may re-cover to the extent of benefits conferred on the employer, afterdeducting the damages resulting from his breach. But in Minne-sota and a majority of the American jurisdictions, it is held thatthe employee can recover nothing for part performance of anentire contract in case of willful abandonment or discharge forgood cause .2 To punish a willful breach, exemplary damagesmight be allowed in the discretion of the court or jury. But tocompel an arbitrary, mechanical, automatic forfeiture of all paywhere the defendant has received and keeps the benefit ofvaluable services, especially where the contract is nearly com-pleted, is crudely severe, like capital punishment for all felonies.There is no relation between the damage done to the defendantby the breach and the amount given to the employer by way offorfeiture. The longer the plaintiff serves, the more he is pun-ished. Would it not be sufficient to prescribe attorneys' fees ora discretionary penalty? Even willful wrong-doing is not tobe punished arbitrarily without regard to the degree of culpa-bility or the loss or injury inflicted.26

22 See Corbin, Conditions in the Law of Contracts, 28 Yale L. Jour.739, 761.

23"Cardozo, J., in Helgar Corp. v. Warner's Features, Inc., (1918) 222N. Y. 449, 451, 119 N. E. 113.

24(1834) 6 N. H. 481, 26 Am. Dec. 713; 6 R. C. L. 975.25 Nelichka v. Esterlty, (1882) 29 Minn. 145, 15 N. W. 668; Peterson

v. Mayer (1891) 46 Minn. 468, 49 N. W. 245; Von Heyne v. Tompkins,(1903) 89 Minn. 77, 93 N. W. 901, 5 L. R. A. (N.S.) 524; Johnson v.Fehsefeldt, (1908) 106 Minn. 202, 118 N. W. 797; Sipley v. Stickney,(1906) 190 Mass. 43, 76 N. E. 226, 5 L. R. A. (N.S.) 469; 3 Williston,Contracts, Sec. 1477.

262 Williston, Contracts, Sec. 842; Ashley, 24 Yale Law Jour. 544.


A tendency may be noted in the more recent decisions toallow a servant discharged for cause to recover on quantummeruit for the value of the part performance, subject to an off-set for damages caused by his misconduct. An employee maygive good cause for discharge, for want of skill or strength,while honestly endeavoring to fulfill his contract. Consequently,recovery has been sometimes allowed to a discharged employeewhere it would be denied to one guilty of willful abandon-ment..2 7 A dishonest servant who has stolen his employer's moneymay be promptly discharged and he will forfeit all rights tocompensation for services during the period in which the dis-honesty occurred. But if the employer keeps the plaintiff in hisservice after notice of his misconduct, he waives all right to for-feit his wages.

28

Contracts for the sale of goods seem to afford an exceptionto the general rule that a quasi contractual claim will not beraised in favor of one who has willfully broken his contract. Ifthe seller delivers to the buyer a less quantity of goods than hecontracted to sell, he may recover, by the weight of authority,the reasonable value of the part delivered less the damages oc-casioned by his default in making complete performance.2 ' Therecovery is not allowed upon the express contract but uponquantum valebat,30 to obviate the injustice of allowing the buyerto retain the benefit of the goods without paying for them. 31

Under the Uniform Sales Act,32 if the buyer retains the goodsdelivered knowing that the seller is not going to perform thecontract in full, he must pay for them at the contract rate. If,however, the buyer has used or disposed of the goods deliveredbefore he knows that the seller is not going to perform his con-tract in full, the buyer will not be liable for more than the fairvalue to him of the goods so received.

A person may in part performance of a contract have giventhe other party land, goods, labor and materials, money or

27Hildebrand v. American Fine Arts Co., (1901) 109 Wis. 171, 85N. W. 268.

28 Person v. McCargar, (1904) 92 Minn. 294, 99 N. W. 885.29 Saunders v. Short, (1898) 86 Fed. 225, 30 C .C. A. 462; Mead v.

Rat Portage Lumber Co., (1904) 93 Minn. 343, 101 N. W. 299.30 McCurry v. Purgason, (1915) 170 N. C. 463, 87 S. E. 244; Ann.

Cas. 1918 A 997.31 Oxendale v. Wetherell, (1829) 2 Barn & C. 386, 109 Eng. Rep. 143;

United States v. Molloy, (1906) 144 Fed. 321, 11 L. R. A. (N.S.) 487;2 Am. L. Rep. 643, 663, 675 n.; Thurston, Cases on Quasi Contracts, 387,390 n.

32 Sec. 44.


services. Why should the rights of one in default be differentas to one kind of part performance than another? Why shoulda seller who has willfully broken his contract, be allowed to re-cover the reasonable value of the portion of the goods delivered,while other persons who have broken a contract cannot sue forbenefits conferred by them? Which is the correct rule? Someconsistent principle should be adopted and followed.

It is generally held where a purchaser of land or goods entersupon the performance of his contract to purchase and makesdefault after paying part of the price, that he cannot recoverthe money so paid.33 Thus in Sanders v. Brock,34 is was heldthat the vendor of land was not liable to a defaulting purchaserto restore to him two thousand dollars paid as part of the pur-chase money, even though the vendor had resold the propertyfor a price largely in excess of the sum agreed to be paid by theplaintiff and was not damaged by his default. In this case, how-ever, the plaintiff had declined to complete his contract. If thepurchaser had reconsidered his refusal and tendered paymentto the vendor before resale, he might possibly have put him tohis election to perform the contract or return the payments re-ceived.

The right to recover so much of the payments made as ex-ceeds the damages suffered by the other party has been allowed insome cases. 35 Thus in Michigan Yacht & Power Co. v. Busch36

it was held that a plaintiff may recover to the extent that he hasbenefitted the defendant by part performance of the contractwhich he has failed to carry, out, his recovery being subject torecoupment of damages sustained by the defendant. As Lurton,J, says :"In justice defendants have no right to more of the money thanwill compensate them for loss by- reason of plaintiff's refusal tocarry out the contract."But recovery would be denied in most jurisdictions, probablywithout regard to the reason why plaintiff made default, whetherit was willful or through misfortune.38

33 McManus v. Blackmarr, (1891) 47 Minn. 331, 50 N. W. 230.34 (1911) 230 Pa. 609, 79 Ati. 772, 35 L. R. A. (N.S.) 532.3 3 Williston, Contracts, Sec. 1476.36 (1906) 143 Fed. 929.37 See also Cherry Valley Iron Co. v. Florence, etc., Co., (1894) 64

Fed. 569, 574, 12 C. C. A. 306; McDonough v. Evans M. Co., (1902) 112Fed. 634, 637; 50 C.-C. A. 403; Clark v. Moore, (1853) 3 Mich. 55, 58, 281;Wilson v. Wagar, (1873) 26 Mich. 452; Sabas v. Gregory, (1916) 91Conn. 26. 98 Atl. 293; Hayes v. Jordan, (1890) 85 Ga. 741, 9 L. R. A. 378.

38 3 Williston, Contracts, Sec. 1476.


It is the general rule, as we have seen, in the case of an entirecontract, that if one party stops without excuse before full per-formance, he cannot recover anything for the value of the serv-ices actually rendered." If, on the other hand, the contract is"divisible" or "severable," the court can allow recovery for therateable portion of the work done or performance rendered lessdamages for the breach. 40 Thus, if the contract can be construedas divisible, exact justice may be achieved. The plaintiff will bepaid for what he has done and the defendant can deduct damagesfor defects in the performance. As Mitchell, J., says inMcGrath v. Cannon :41"In view of the harshness of the rule which prevents one whohas failed fully to perform his contract from recovering any-thing for past performance, the benefits of which the defendanthas received, the courts are inclined, whenever they consistentlycan, to construe a contract as severable rather than entire.. This works out substantial justice and permits the one partyto recover for what he has performed, but at the same time per-mits the other party to counter-claim or recoup whatever dam-ages he has sustained by the non-performance of the other itemsof the contract."

If, on the other hand, the contract is entire, the defendantmay retain the part performance without either paying or do-ing anything for it, though the value is out of all proportion tothe damages he has suffered by non-completion. Thus in thecase of Johnson v. Fehsefeldt, 2 the plaintiffs, the owners of athresher, contracted to thresh all defendant's crop of grain at somuch per bushel. Before th& entire crop had been threshed, theplaintiffs hauled the machine away and refused to thresh more,for the reason that they were losing money. Three hundred acresof grain were left in shock. Plaintiffs sued for the work andthreshing they had done at the agreed price per bushel. It washeld that they could not recover here either on the contract it-self or on quantum meruit for part performance. Where theplaintiff willfully and without just cause refuses to complete acontract, or there is a substantial departure from its terms, therecan be no partial recovery. The contract was held to be entire,not divisible, in spite of the fact that compensation ,was fixed at

39 National Knitting Co. v. Bouton & Co., (1909) 141 Wis. 63, 123 N.W. 624; Siegel, Cooper & Co. v. Eaton & Co., (1897) 165 Ill. 550, 46 N.E. 449.

40 Stubbs v. Holywell Ry. Co., (1867) L. R. 2 Ex. 311.41 (1893) 55 Minn. 457, 56 N. W. 97.42 (1908) 106 Minn. 202, 118 N. W. 797, 20 L. R. A. (N.S.) 1069.


so much per bushel. In Lynn v. Seby,43 and in McMillan v.-Mal-loy,44 however, which were also cases of threshing contracts, al-

though the contracts were held to be "entire," yet recovery was

allowed for the value of the work done, less damages.45

What is the test to distinguish entire and divisible contracts?

Mitchell, J., says in McGrath v. Cannon :46

"Whether a contract is entire or severable, like all questions ofconstruction, depends on the intention of the parties, and mustbe determined in each case by considering the language employedand the subject-matter of the contract, and how the partiesthemselves have treated it."

But it has been pointed out that courts ascribe to the parties an

intention based on what a reasonable expectation as to their re-

spective rights, duties, or remedies would be under the contin-gency which has happened, and determine the entirety or divisi-

bility of a contract accordingly.47 To discuss the matter in these"chameleonic" terms usually obscures the real issue. It would

be preferable to deal with the question frankly in terms of rules

based on fairness rather than of fictitiously imputed intentions.

A contract may be regarded as entire for one purpose and

severable for another. This being so, the attempt to classify con-

tracts as entire and divisible results in much bewilderment and

confusion. Severable or divisible may be used simply as indi-

cating that a portion of the price is, by the terms of the agree-

ment, set off against a portion of the goods; or in general, that

the consideration on each side is- apportionable and that the

price for any part performance may be ascertained by compu-

tation at a certain rate.48 "Entire contract" is sometimes used in

the sense that the seller is bound to furnish all the goods, or that

the servant is bound to do all the work before demanding any

pay, or in other words, that payment is to be made only after

complete performance. 49 This is contrasted with a contract

where a debt immediately arises when part of the performance

has been rendered. "Entire" may, on the other hand, be used

to indicate that the buyer must either take all of the goods or re-

43 (1915) 29 N. Dak. 420, 151 N. W. 31.44 (1880) 10 Nebr. 228, 4 N. W. 1004.45 See also Riech v. Bolch, (1886) 68 Iowa 526, 27 N. W. 507.46 (1893) 55 Minn. 457, 57 N. W. 150.472 Am. L. Rep. 643 n.; 2 Williston, Contracts, secs. 825, 1611.48Williston, Sales, sec. 804; 2 Williston, Contracts, secs. 861, 1028.49 Baker v. Higgins, (1860) 21 N. Y. 397; Bentley v. Edwards, (1914)

125 Minn. 179, 146 N. W. 347, 51 L. R. A. (N.S.) 254.


ject them all, and cannot accept the portion which is of propergrade and reject the balance. 50

The most common use of the terms "entire" and "divisible,"however, especially in the present connection, is with referenceto the question whether a breach as to one portion or installmentof the contract is an excuse (1) from the duty to'go on withthe contract, and (2) from the duty to pay for what has beenreceived.51 Where goods are sold to be delivered in installments,it is in general presumed that the contract -was made in contem-plation of full performance. In a contract of employment by theyear, to entitle the plaintiff to recover the specified wages forany one month, he must have substantially performed his dutiesfor that month. But if the plaintiff, before the expiration of theyear, abandons the service without excuse or by his own willfulfault, can he recover nothing for the previous months which hehas worked ?

It would seem that the courts are engaged in a fruitless effortin the attempt to classify contracts in and of themselves as entireor divisible. It is not the nature of the contract, but the nature-and effect of the breach which controls the question. The termsused describe the result rather than the cause, the thing to beexplained rather than the explanation. 3 The true test of theright to, recover cannot be found in the unity of the performanceor in the terms of the contract or the apportionment of the con-sideration or the intention of the parties, but only in the justeffect of the breach under the circumstances. What, then, shouldbe the effect of breach after part performance? Where a breachoccurs at the outset, (in limine) a stricter rule obtains thanafter part performance. A proposition is laid down in the notesto Pordage v. Cole14 as the reason of the decision in Boone v.Evre and similar cases, as follows:

"Where a person has received a part of the consideration forwhich he entered into the agreement, it would be unjust thatbecause he has not had the whole, he should therefore be permit-

50 2 Am. L. Rep. 643, 655 n.512 Am. L. Rep. 641 n.52 Peterson v. Mayer, (1891) 46 Minn. 468, 45 N. W. 245; Diefenback

v. Starck, (1883) 56 Wis. 462, 14 N. W. 621; Johnson v. Fehsefeldt, (1908)106 Minn. 202, 118 N. W. 797, 20 L. R. A. (N.S.) 1069; 2 Williston,Contracts, secs. 862, 872.

'5 See F. C. Woodward, Doctrine of Divisible Contracts, 39 Am. L.Reg. (N.S.) 1.

r4 1 Williams' Saunders, 555.


ted to enjoy that part without either paying or doing anythingfor it.

"Therefore, the law obliges him to perform the agreement onhis part, and leaves him to his remedy to recover any damageshe may have sustained in not having received the whole consider-ation."

This is true only of substantial performance. It is not true

as this quotation seems to imply, that a partial performance will

enable a party to enforce a contract, or that a material breach

after part performafice is not a ground of rescission. But there

is no such dilemma, as seems to be implied, between permitting

a party to retain all the benefits of part performance without

compensation, or requiring him to perform the rest of the con-

tract on his part. On the contrary, when the plaintiff is guilty

of a material breach he cannot insist on further performance

and compel the defendant to resort to an action for damages.

The breach will operate to excuse the duty of the defendant to

perform further, unless he elects to do so.55 The injured party

should be allowed to refuse to go on with the contract in so far

as it is still wholly executory. But so long as he has received

and retains a portion of the performance, he should ordinarily

be bound to make compensation, after the manner of divisible

contracts, in spite of the default as to the rest of the contract.56

As to the executed portions of the contract, the ques-

tion should be whether the injured party has received sub-

stantial benefits from part performance over and above the dam-

ages caused by the breach, and whether the conduct of the plain-

tiff is so culpable that the policy of the law demands a denial of

all relief by way of penalty. As to the executory portions of the

contract, the other party may well be excused by any material

breach."7

We may conclude, then, that on principle even so called entire

contracts should be treated as "divisible," after part performance

has been accepted, in the sense that the value of the portions re-

ceived must be paid for, even though the rest of the contract is

not performed, subject to the deduction of damages. Breach of

55 H. D. Williams Cooperage Co. v. Scofield, (1902) 115 Fed. 119, 123,

53 C. C. A. 23; Clarke Contracting Co. v. City of New York, (N.Y. 1920)

128 N. E. 241.56 See 2 Williston, Contracts, sec. 872.572 Am. L. Rep. 665-669; 1 Black, Rescission of Contracts, sec. 215;

24 R. C. L. 279; Auer v. Twitchell, Robinson P. Co., (Me. 1920) 111

At. 570.


a condition implied in law should not be permitted to defeatone's quasi contractual claim to recover compensation on quan-tum meruit or valebat for benefits conferred by part perform-ance, unless possibly in case of bad faith or willful breach.5 8 Itis only by recognizing the distinction between the effect of breachas to the executed and executory portions of the contract thatarbitrary and unjust forfeitures may be avoided. A materialbreach after part performance will excuse further performanceby the injured party, but should not necessarily penalize the de-faulting party by the forfeiture of all compensation for suchpart performance as he has rendered. The measure of damagesfor breach of contract should be the same in all cases.

II. RELIEF AGAINST EXPRESS STIPULATIONS.

The law, while looking with righteous abhorrence on for-feitures, and washing its hands of their enforcement, after themanner of Pontius Pilate, yet has been reluctant to intervenewith affirmative relief or to formulate any consistent principlecondemning the validity of cut-throat provisions which in theiressence involve forfeiture. Although the law will not assist inthe vivisection of the victim, it will often permit the creditor tokeep his pound of flesh if he can carve it for himself. 59

It is an anomaly in the law that in some cases it will relievefrom a forfeiture in the teeth of any provision which calls for one,and in other cases, similar in principle, it will meekly acquiescewhile hard fisted creditors take advantage of the slips of theunfortunate. The vigorous policy of equity with reference tobonds and mortgages has not been carried out consistently incontracts generally. The maxim, "once a mortgage always amortgage," expresses the principle that redemption will be al-lowed in spite of any agreement that the mortgaged propertyshall be forfeited. All clogs on the equity of redemption arefutile.60 But as Professor Williston points out in his recent note-worthy treatise,6 ' the principle which prohibits the enforcementof forfeitures and penalties in mortgages and bonds has not beenapplied to situations similar in principle that arise from con.di-

58 Woodward, Quasi Contracts, 267; Keener, Quasi Contracts, 225; Danev. Wood, (1905) 73 N. H. 222, 60 Atl. 744, 70 L. R. A. 133; Rosenthal P.Co. v. National, etc. Co., (1919) 226 N. Y. 313, 123 N. E. 766.

59 Pence v. Tide Water T. Corp., (Va. 1920) 103 S. E. 694.60 2 Williston, Contracts, sec. 771; 3 Story, Equity, 14th Ed., sec. 1728;

Samuel v. Jarrah, etc., Corp., [1904] A. C. 323.81 2 Williston, Contracts, Chap. XXV.


tions in other contracts. "Neither law nor equity has dealt ade-quately with oppressive installment contracts. ' 62 As ProfessorWilliston says :63

"It should not be admitted that a court of equity today has an in-ferior instinct for natural justice or an inferior power to giveeffect to it, than Chancellors possessed three centuries ago."

The law carefully limits the remedies which the parties mayprovide for themselves by way of penalty, though called "liqui-dated damages." 64 But an express condition precedent may of-ten involve a loss or forfeiture, "as penal in its effects as a prom-ise to pay a penalty." 65 This is strikingly the case in instalmentcontracts where time is declared to be "of the essence," andthe buyer of land or goods may be subjected to a forfeiture ofall the payments he has made. Yet it is generally laid down thatan express condition precedent must be literally and exactlyperformed and any breach will excuse the duty of performanceby the other party. 6 Even impossibility will not ordinarily ex-cuse breach of condition precedent, such as the payment of a lifeinsurance premium by a certain day.67 Here also a distinctionmay be drawn between what is executory and what is executed.It has been recognized where impossibility to comply with acondition precedent of an insurance policy was caused by war,and the insured would lose the benefit of the money previouslypaid for premiums without his fault, that in such a case the in-sured was entitled to relief from forfeiture. The United StatesSupreme Court enforced a quasi contractual right to the cashsurrender value of the policy, though no such right was reserved,on the ground that it would not be just for the insurance com-pany to retain the money received and forfeit the equitable valueof the policy.68

The courts of law as well as courts of equity are at libertyto disregard express conditions where they are harsh and penal

62William H. Loyd, 29 Harv. L. Rev. 123.63 2 Williston on -Contracts, 1475, secs 791, 793."64Quigley v. C. S. Bracket, (1914) 124 Minn. 366, 145 N. W. 29; 34

L. R. A. (N.S.) 4, 13.65 2 Williston, Contracts, secs. 776, 793.66 Kelly v. Sun Fire Office, (1891) 141 Pa. St. 10, 21, 21 Atl. 447.67 Klein v. New York Life Ins. Co., (1881) 104 U. S. 88, 26 L. Ed.

662; 2 Williston, Contracts, secs. 808, 809.68 New York Life Ins. Co. v. Statham, (1876) 93 U. S. 24, 32, 23 L.

Ed. 789.


in their effects and provide for a penalty or forfeiture.60 AsProfessor Williston says :70

"The court often under the disguise of the construction is infact giving relief from the terms of the contract on principlesanalogous to those which have influenced courts of equity in re-lieving from forfeiture."

Where a condition is inserted to enforce punctual perform-ance of a duty it should be considered merely as remedial or ac-cessory, and be relieved against upon payment of the damagesactually incurred. The question should not turn on whether thecondition is subsequent or precedent, as this is a matter of form,and the law should look at the substance and at the main objectof the contract.7 '

It has been held in some cases that the doctrine of substan-tial performance of building contracts has no application tocases where an architect's certificate is made a condition prece-dent to the liability of the owner, and that the mere use of thebuilding is not an acceptance of work or a waiver of the produc-tion of an architect's certificate. 72 But other courts refuse t oenforce the express condition strictly, and adopt the rule of sub-stantial performance from implied conditions to dispense withthe express condition. 73 The presentation of the certificate is initself of no value. The loss of the builder's labor and materialfor a slight default involves a forfeiture, and the owner cannotunjustly enrich himself by the enforcement of the condition. Ifno forfeiture would result, the condition will be strictly en-forced.74

A provision forfeiting all wages which may be due at thetime of leaving, if the employee leaves without certain notice,not confining the amount to any fixed sum or proportion of thewages for the year, or for any given time, is not reasonable andwill not be enforced. It is a harsh and oppressive exaction wherethe forfeiture might cover a very long period.75 The law will

69 Ashley, Contracts, 170; 4 Columbia L. Rep. 423; 6 R. C. L. 906.70 2 Williston, Contracts, sec. 806. See also A. L. Corbin,'28 Yale L.

Jour. 753; Gates v. Parmley, (1896) 93 Wis. 294, 306, 307, 66 N. W. 253.71 Loyd Cases on Certain Equitable Doctrines, 14, 49 n.; 29 Harv. L.Rep. 123.

72 Pope v. King, (1908) 108 Md. 37, 69 Atl. 417, 16 L. R. A. (N.S.)489.

732 Williston, Contracts, secs. 805, 842.74 Birch Cooley v. First National Bank, (1902) 86 Minn. 385, 90

N. W. 789.75 Richardson v. Woehler, (1872) 26 Mich. 90; Schrimpf v. Tenn.

Mf. Co. (1887) 86 Tenn. 219, 6 S. W. 131.


not permit a party to stipulate for a remedy by way of self helpby which the other will suffer an arbitrary loss, disproportionateto the injury, and by which he may enrich himself by the oppres-sion of another. The English courts, however, in the famousold case of Cutter v. Powell,76 decided in 1795, held that nowages could be recovered although the plaintiff had performedhis duties as second mate until the day of his death and hadcompleted two-thirds of the voyage, because of an express con-dition by which a lump sum was payable "provided he proceeds,continues and does his duty as second mate from hence to theport of Liverpool."

Very severe forfeitures are permitted by the law of mostjurisdictions in contracts for the conditional sale of chattels,and the equitable principle which forbids a forfeiture is ignored.The seller is allowed to resume possession without rescindingthe contract or returning the payments made, even though hemay already have collected the major part of the contractpricey.7 In some cases, however, it is held that even if there isan express provision for forfeiture uppn default, the seller can-not have the property and the payments too, but must accountfor the excess of payments over the damages he has suffered.7 8

It has been held in Minnesota that it is not a condition prece-dent to replevin that the seller return or tender back partial pay-ments made or notes given.7 1 Whether partial payments madeby the buyer are forfeited, in the absence of a provision to thateffect in the contract, was not decided.

Statutes have been enacted in several states to prevent theinjustice to the buyer of permitting a forfeiture where most ofthe price has been paid."' Such protection should be affordedthe buyer in spite of any attempt in the contract to surrenderit."- The essential character of a conditional sale is that of a

76 (1814) 6 T. R. 320.772 Williston, Contracts, sec. 374; Clark v. Barnard, (1883) 108 U. S.

436, 27 L. Ed. 780, 2 S. C. R. 878.7s Preston v. Whitney, (1871) 23 Mich. 260; S. D. Puffer & Sons Co.

v. Lucas, (1893) 112 N. C. 377, 17 S. E. 174, 19 L. R. A. 681; Hays v.Jordan, (1890) 85 Ga. 741, 11 S. E. 833, 9 L. R. A. 373; Pierce v. Staub,(1906) 78 Conn. 459, 62 Atl. 760, 3 L. R. A. (N.S.) 785. ComparePfeiffer v. Norman, (1911) 22 N. Dak. 168, 133 N. W. 97, 38 L. R. A.(N.S.) 891.

79 Raymond Co. v. Kahn, (1914) 124 Minn. 426, 145 N. W. 164.80 38 L. R. A. (N.S.) 899 n.812 Williston, Contracts, sec. 738; Desseau v. Holmes, (1905) 187

Mass. 486, 73 N. E. 656, 105 A. S. R. 417.


sale with a mortgage back, and the danger of forfeiture is thesame.82

In land contracts time is frequently declared to be of the

essence of the contract, and it is provided that the failure of

punctual payments of installments will be fatal. The vendorby the literal terms of the contract is armed with power to in-sist upon forfeiture upon failure of the buyer to pay a single

dollar of the price at the exact time prescribed. Where timeis of the essence, a clause providing that in case of default in

payment of an installment when due, all payments shall beand remain the property of the seller is valid and binding. A

failure to perform on the day stipulated ipso facto involves a

forfeiture, without the necessity of notice or any affirmativeact on the part of the vendor.8 3 In some cases, however, it

is held that a mere failure to pay the purchase money accordingto the terms of the agreement will not produce a forfeiturewithout the tender of a deed to 'put the purchaser in default. 4

By the great weight of American authority no relief can be

afforded against express conditions precedent inflicting for-

feiture where the contract makes time of the essence, althoughthe delay may be very slight and although the buyer has paid

a large part of the price and has greatly improved the land.85

The vendor is entitled to the land, with all improvements, fix-

tures and growing crops, and in addition to the purchase moneyalready paid.

In a recent Minnesota case86 it was held that a vendee who

defaults in payments due under a land contract and announces

82 R C. Bartley Co. v. Lee, (1915) 87 N. J. L. 19, 93 Atl. 78.83 But see 107 A. S. R. 726 n.; Waite v, Stanley, (1914) 88 Vt. 407,

92 Atl. 633, L. R. A. 1916C 886, 893; Vito v. Birkel, (1904) 209 Pa. St.206, 58 Atl. 127.

84 Frink v. Thomas, (1891) 20 Ore. 265, 25 Pac. 717, 12 L. R. A. 239;Wells-Fargo Co. v. Fage, (1905) 48 Ore. 74, 80, 83 Pac. 856, 3 L. R. A.(N.S.) 103; Reese v: Westfield, (1909) 56 Wash. 415, 105 Pac. 837, 28L. R. A. (N.S.) 956; O'Connor v. Hughes, (1886) 35 Minn. 446, 29N. W. 152.

85 True v. Northern Pac. Ry. Co., (1914) 126 Minn. 72; 147 N. W.948; Glock v. Howard, (1898) 123 Cal. 1, 55 Pac. 713; Pomeroy, Equity,4th Ed., sec. 455, secs. 222, 228; Skookum Oil Co. v. Thomas, (1912)162 Cal. 539, 123 Pac. 363, L. R. A. 1918B 551 n.; Heckard v. Sayre,(1864) 34 Ill. 142; Cheney v. Bilby, (1896) 74 Fed. 52, 20 C. C. A. 291;2 Williston, Contracts, 1517; Hurley v. Anicker, (1915) 51 Okla. 97,151 Pac. 593, L. R. A. 1918B 538, 540 n. On right of vendee to recoverpayments when in default; Ames, Cases on Equity, 341 n.; EasternOregon Land Co. v. Moody, (1912) 198 Fed. 7.

86 Nelson Real Estate Agency v. Seeman, (Minn. 1920) 180 N. W.227.


his inability to complete the contract, is not entitled to a returnof the down payment made when the contract was signed; norcan the court in equity require a return of the money by thevendor as a condition of the cancellation of the contract. Inthis case the purchaser had been drafted into the United Statesarmy and was killed in action on the battlefields of France. Heleft no estate, and when the vendor sued for a specific per-formance or a cancellation against his administrator, the admin-istrator pleaded inability to complete and asked the refundmentof the advance payments; but relief was denied although thepayments made exceeded the vendor's damages.

Suppose a purchaser has contracted for a house or a farmto be paid for by installments and no conveyance is to be madeuntil all the installments are paid. It is declared to be a condi-tion precedent that all payments must be punctually made onthe very day they fall due, and on the failure to pay any in-stallment when due, all obligations of the vendor shall be atan end and all previous payments forfeited as liquidated dam-ages. Time is declared to be of the.essence of the contract. Letus suppose that the purchaser under such a contract has beenin possession for years, has paid a large portion of the pur-chase price and has expended thousands of dollars in improve-ments on the land, and then by forgetfulness, or some otheraccidental cause, omits to pay the last installment of one thou-sand dollars by the exact hour prescribed by the contract. Heis ready with the money in his hands an hour or a day afterthe default, offers it to the vendor and implores him to takeit; .yet under the doctrine of many American courts, he may bedoomed to see the whole of his estate, the reward of years oftoil and effort, entirely swept away from him in a moment bythe unbending rule of law as to forfeiture where time is madeof the essence of the contract.87

In the leading case of Glock v. Howard,88 Justice Henshaw,in speaking of the remedies open to the vendor under such acontract, says:"Still resting upon the contract, he may remain inactive, andyet retain to his own use the moneys paid by the vendee, sothat it is of no moment whether or not the contract declares that

87 See Edgerton v. Peckhamn, (1844) 11 Paige (N.Y.) 352; Cheneyv. Bilby, (1896) 74 Fed. 52, 60.

s8 (1898) 123 Cal. 1, 55 Pac. 713.


such moneys shall upon breach be forfeited as liquidated dam-ages.

"If his generosity prompts him to do so, he may agree withthe vendee for a mutual abandonment and rescission, in whichcase the vendee in default would be entitled to a repaymentof his money."

Even if specific performance must be denied, an equitable ora quasi contractual right to recover previous payments and thevalue of improvements, subject to deduction for any use andpossession enjoyed and any damages caused, should surely be rec-ognized to prevent a forfeiture s 9 Otherwise the law becomesthe passive accessory of any Shylock who chooses to wrest froma purchaser an estate which he has almost paid for by reasonof some minor default.

The relation of the vendor and purchaser of land, undera wholly executory contract, has been likened to the relation ofmortgagor and mortgagee. The analogy is especially close whenthe buyer is given possession and enjoyment of the land. Thevendor's true remedy is foreclosure, even where time is made ofthe essence. But the right to relief from forfeiture is not de-pendent on the exactitude of this analogy, as there is no reasonwhy such relief should be confined to bonds and mortgages.

In recent decisions the English Privy Council has held thatwhile the purchaser in -default may not be entitled to specificperformance under a contract where time is made of the es-sence, nevertheless a return of the advance payments should beallowedf 1 This eminent court held that forfeiture of the moneypaid under the contract was a penalty from which relief mightbe granted on proper terms. It Was pointed out that the pen-alty would become more and more severe as the performanceapproached completion, and the money liable to confiscation wouldbecome larger. If time is made of essence, the purchaser to se-cure his rights under the contract, must perform within the stip-ulated time. But equity in denying specific performance willrequire the seller to repay the portions of the price which he hasreceived. The purchase money paid is to be regarded only as se-curity for the true amount of damages which the vendor has

89See Bradley, J., in New York Life Ins. Co. v. Statham, (1876)93 U. S. 24, 32, 23 L. Ed. 789; 2 Williston, Contracts, 1550 n.

90 Lytle v. Scottish American Mortgage Co., (1905) 122 Ga. 458, 50S. E. 402; 2 Williston, Contracts, sec. 791; 1 Pomeroy, Equity Juris-diction, 4th Ed., sec. 368.

91 Steedman v. Drinkle, [1916] 1 A. C. 275.


suffered by the purchaser's breach. This seems especially clearwhere the purchaser is ready and willing to pay the balance ofthe price and desires specific performance, but the vendor claimsforfeiture of land and money on the basis of some slight delay.9 2

In some jurisdictions, particularly in the western provincesof Canada, provisions for forfeiture of payments in land con-tracts are held to be invalid, either at common law or by statute,and the court will order the defendant to restore what he hasreceived in part payment less actual damages.9 3 These courtswill not permit the vendor to paralyze judicial power by the in-sertion of the magic phrase that "time is of the essence of thecontract."

It is sometimes difficult to distinguish between a declarationof rescission and a declaration of termination or forfeiture. Theserious breach by one party may be treated by the other as aground of rescission, authorizing him to disaffirm the contract.If he rescinds, the contract is avoided ab initio, and the otherparty is entitled to be put in statu quo. The idea of rescissionimplies that what has been given shall be restored. Where thevendor, upon default, elects to rescind the contract, there is noforfeiture of payments made by the vendee.94

In Pierce v. Staub,95 the vendor, with inordinate greed, claimeda forfeiture of sixty thousand dollars without any showing thathe had lost a dollar by reason of the default of the vendee. Itwas held that a rescission had been effected by the notice of thetermination of the contract. The notice of the termination wassaid to be equivalent to a formal or mutual rescission, and,therefore, the vendor could not retain advance payments, at leastin the absence of a forfeiture clause.

According to many courts, however, mere notice of defaultor forfeiture, demand of possession, re-entry or even an actionto cancel the contract and quiet title, do not constitute a rescis-sion entitling the vendee to recover payments made.9" It is

92 53 Can. L. Journal, 161, 166; Labelle v. O'Connor, (1908) 15 Ont.L. Rep. 519, 536.

93 Brown v. Verzani, (1917) 181 Iowa 237, 244, 164 N. W. 601; Pricev. Ruggles, (1917) 28 Manitoba L. Rep. 132; Brown v. Walsh, (1919)45 Ont. L. Rep. 646; Moodie v. Young, (1908) 1 Alberta L. Rep. 337;Barnes v. Clement, (1896) 8 S. Dak. 421, 12 S. Dak. 270, 81 N. W. 30.

94 Frink v. Thomas, (1891) 20 Ore. 265, 25 Pac. 717, 12 L. R. A. 239.95 (1906) 78 Conn. 459, 62 Atl. 760, 3 L. R. A. (N.S.) 785.96List v. Moore, (1912) 20 Cal. App. 616, 129 Pac. 962; Newell v.

Stone Co., (Cal. 1920) 184 Pac. 659, 9 Am. L. Rep. 993; Malloy v. Muir,(1901) 62 Nebr. 80, 86 N. W. 916.


well, however, for the vendor to be careful of the language he

uses when he declares the contract terminated. In Waters v.

Pearsoiz,97 on the other hand, it was held that if the seller elects

to keep the land and to terminate the contract because of the

buyer's default, he cannot withhold advance payments on the

ground of forfeiture, although he may apply them to satisfaction

of his actual damages.98

In Lytle v. Scottish-Amnerican Mortgage Co.99 it was held that

although the contract itself provides for the retaking of posses-

sion on default and the forfeiture of advance paymenti, never-

theless, when the vendor terminates the contract for default of

the vendee, the latter is entitled to an accounting for payments

and improvements made. If, on default, the vendor seeks to

recover the land, he must account to the vendee for the purchase

money. His action in retaking possession is a rescission.

The tendency of the law is to deny to a defaulting vendee

reimbursement. But in this case Lamar, J., gives one of the

best discussions on the subject of forfeiture to be found in

the books. The court acutely summarizes and criticizes the view

upholding a provision for forfeiture of the purchase money

or improvements on termination of the contract. The court

says :100

"Those holding this view insist that not to enforce a stipula-tion for forfeiture is to interfere with the right of contract; thatto permit the vendee as plaintiff or defendant to recover thevalue of improvements made or to regain money previously paid,leaves the vendor where he cannot know whether the land issold or not; forces him, during the credit period, to be ready atall times to refund the money paid; enables the vendee to takeadvantage of his own wrong, so that if the land increases invalue, he can insist on performance, while if the market pricedeclines, he will cease to make payments, and upon the exer-cise of the reserved right to rescind, the vendee will then de-mand the return of what has been previously lawfully paid, orseek reimbursement for improvements which have become a partof the real estate."

The court answers these contentions as follows:

"To the extent 6f the land sold, the improvements thereon, themoney in the hands of the vendor received of the vendee, andalso to the extent of the vendee's general estate, the law guar-

97 (1914) 163 Iowa 391, 144 N. W. 1026.98 See L. R. A. 1918B 544 n; L. R. A. 1916C 893 n.99 (1905) 122 Ga. 458, 50 S. E. 402.100 (1905) 122 Ga. 458, 50 S. E. 402.


antees the vendor against loss if he sues to recover the pur-chase price. He is not obliged to rescind. But when he doesexercise that right, he discharges the vendee from liability underthe contract, sets aside the sale, and is entitled to a return of theproperty subject only to the condition that as his status has beenrestored, he must also restore the status of the vendee.101 Thevendee is not entitled to a return of his purchase money untilhe has allowed, as a deduction therefrom, all damages causedby his breach--one element of which will be the fair rental valueof the property during the time he occupied it. But when hehas done this, that is all that the law requires. Damages forthe breach, payment of the rent, and a return of the land restorethe vendor to his status.

"The prohibition against the exaction of penalty and enforce-ment of forfeiture is not alone for the benefit of those who havekept their contracts. They do not need it. The effort to enforcea penalty and forfeiture is generally against a party who is de-linquent."1o2

It would seem equitable to hold that a party cannot treat acontract as terminated so as to resume the property which he hasparted with and at the same time keep the money which he hasreceived as the consideration for it. In like manner, the pur-chaser cannot retain possession of the land or other part per-formance which he has received- and at the same time defendpayment of his note for the purchase price on the ground of de-fective title. He must either rescind or rely on a cross actionfor damages.' 3

Statutory provisions are badly needed to give purchasersof land and chattels more effective protection against forfeiture.By Minnesota law,1"4 thirty days' notice must be given of an in-tention to terminate a land contract for default. It is held that thisproceeding is in effect a strict foreclosure of the contract andthat a tender made after the. expiration of thirty days is of noavail. The provision was enacted to prevent persons havingrights under executory contracts for the purchase of lands frombeing cut off too abruptly upon failure to meet installments due

101 Civil Code, secs. 3924, 3712.°0- See also Lathan v. Davis, (1891) 44 Fed. 862; Compare Raymond

Co. v. Kahn, (1914) 124 Minn. 426, 145 N. W. 164; See also Ann. Cas.1917C 85 n.

103 Daniels v. Englehart, (1910) 19 Ida. 548, 111 Pac. 3, 39 L. R. A.(N.S.) 938. Compare Lafferty v. Evans, (1906) 17 Okla. 247, 87 Pac.304, 21 L. R. A. (N.S.) 363, 369; German Say. Inst. v. De La VergneRef. Mach. Co., (1895) 70 Fed. 146, 17 C. C. A. 34; 5 Page, Contracts,secs. 2981-2984.

304 G. S. 1913, sec. 8081.


thereon. It gives the vendee time within which to protect his

rights. 0 1

In Waters v. Pearson,106 it is held that under the Iowa statute

a forfeiture cannot become effective until written notice and

the expiration of thirty days thereafter. "This is a merciful pro-

vision extending a little grace to a party in default who may be

staggering under the load of his undertaking." The court fur-

ther held in this case that a provision for forfeiture is invalid.

"If the vendor's damages be less than the advance payments, we

know of no sound reason of law or morals why the vendee should

not recover the balance remaining." If the vendor elects to ter-

minate the contract and keep the land instead of insisting on

specific performance, he must account for advance payments in

excess of the damages.In California, Montana, North Dakota and South Dakota,

there is a code provision that whenever by the terms of an obli-

gation a party thereto incurs a forfeiture by reason of his failure

to comply with its provisions, he may be relieved therefrom upon

making full compensation to the other party, except in case of a

grossly negligent, willful or fraudulent breach of duty. In Clif-

ton v. Wilson 07 it is stated that this provision is consonant with

the theory of compensation which prohibits parties to contracts

from stipulating therein for forfeitures. 08 This provision does

not seem to have been effective, however, to afford adequate

protection against forfeiture1'0

In Ontario, Manitoba, Alberta, British Columbia and Sas-

katchewan there are statutory provisions as to relief against pen-

alties and forfeitures and the termination of land contracts. The

courts may grant relief to a defaulting purchaser where the ven-

dor is attempting to determine the contract and to enforce a for-

feiture in various ways: (1) By rescinding the contract and

directing the vendor to return all moneys paid less damages; (2)

by decreeing specific performance with compensation;. (3) by

foreclosure, appointing a day for redemption, and in default

either strict foreclosure or sale; or (4) granting an extension of

105 International R. Co. v. Vanderpoel, (1914) 127 Minn. 89, 148 N. W.895.

10 (1914) 163 Iowa 391, 144 N. W. 1026.107 (1913) 47 Mont. 305, 132 Pac. 424.108 See Fratt v. Daniels-Jones Co., (1913) 47 Mont. 287, 133 Pac.

700; Cook-Reynolds Co. v. Chipman, (1913) 47 Mont. 289, 133 Pac. 694.109 Suburban Homes Co. v. North, (1914) 50 Mont. 108, 145 Pac. 2,

Ann. Cas. 1917C 81; cf. Barnes v. Clement, (1899) 12 S. D. 270, 81 N. W.301.


time to the purchaser to remedy his default.110 The rights ofthe parties are being more and more worked out on the analogyof the mortgage relation, and the purchaser's right to claim re-lief against forfeiture has become generally recognized. Amer-ican courts and legislatures have been left somewhat behind byour English and Canadian brethren.

Just as the law refuses to individuals the remedy of seekingredress by self help without resort to the courts, so it shouldregulate -the remedies which they provide for themselves toenforce their contracts, not only by refusing to enforce them, butalso by relieving against unconscionable, oppressive and ruinousexactions in the nature of penalties and forfeitures.

The traditional reluctance to relieve against conditions prece-dent as contrasted with conditions subsequent has no basis, it issubmitted, except in so far as the condition may affect what is stillexecutory as contrasted with what is executed. A distinction maybe drawn between the loss of the right to go on with the contractor to demand specific performance, and the forfeiture of the bene-fits of what one has already given or done. The courts mightwell, in all cases of part performance, require a rescission uponjust terms, as a condition of the right to terminate a contract andhold oneself excused from further duty under it.

110 See McCaul, Remedies of Vendors and Purchasers, 2nd Ed., 119,122, 136; Great W. L. Co. v. Wilkins, (1907) 1 Alberta 155, 167; Cana-dian Pacific Ry. Co. v. Meadows, (1908) 1 Alberta L; Rep. 344; Pro-vincial S. Co. v. Gratias, (1919) 12 Sask. 155; Hall v. Turnbull, (1909)2 Sask. L. R. 89.

forfeiture for breach of contract

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